Friday 28th August 2015, for many entities (read our post about what an entity is) is the GST Due Date for the GST Period 1st June 2015 to the 31st July 2015. If you are unable to pay the GST due then please note that: –

An initial 1% late payment penalty will been charged on the day after the due date.

A further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.

Every month the amount owing remains unpaid, a further 1% incremental penalty will be added.

As well as the penalties above you will be charged interest on tax that remains unpaid until it is eventually paid.

There has been talk recently on how the penalties mount up increasing the debt far beyond the original GST amount owing. Read More »

For taxpayers who are required to pay provisional tax, Thursday, 7th May 2015, for many entities(read our post about what an entity is)is the date the 3rd Instalment of Provisional Tax for the Income Tax year 1st April 2014 to the 31st March 2015 is due. If you are unable to make this payment please be aware that in some circumstances you may be charged interest especially if the provisional tax you paid is less than your Residual Income Tax (RIT).

There has been talk recently on how the penalties mount up increasing the debt far beyond the original Provisional Tax amount owing.Read More »

As a new Non-Individual (Company or Trust) business you could have to pay Use of Money Interest to IRD?

A new business (Company or Trust) is one of the categories of taxpayers that may be liable for interest even if they have no provisional tax liability in their first year of operation.

You may have to pay Use of Money Interest (UOMI), if the Residual Income Tax (RIT) is greater than $2,500. Note: RIT is the amount of tax you have to pay, less any tax credits you may be entitled to (excluding working for families’ tax credits or other tax payments made during the year) and any PAYE deducted.

In the first year of operation of a business there is normally no Provisional Tax Due. This is because Provisional Tax is based on the RIT (tax to pay) on the last income tax return when it is more than $2,500. Therefore because this is the first year of operation the tax liability is often overlooked and a Company or Trust ends up with UOMI to pay. Read More »

As the calendar page has turned to show us it is March– which, by the way, happens every year – we see and feel the anxiety levels start to kick-in for business owners and their bookkeeping, accounting and tax professionals. (Yes, even bookkeeping, accounting and tax professionals get anxiety). Wouldn’t it be great to change this annual occurrence of anxiety with just a few simple steps? Your anxiety can be eliminated, if you choose now to implement these tips.

How different would your business be IF…. Your record keeping is current and ready to hand over to your bookkeeping, accounting or tax professional sooner rather than later. At this time of the year, when businesses are pulling their year-end info together for their annual accounts and tax preparation we offer the following Tips. Read More »

Question: From my understanding, considering the company was initially funded by owner funds of $50K put into the company, it should be possible to take owner funds out from revenue earned up to this amount. Is this correct?

Shareholder Current Account

How Funds are Credited

It is common when a company begins operation for the shareholder(s): –

To pay up the share capital, for the purpose of this exercise we’ll say it is $120 being for 120 Fully Paid-up $1.00 Shares, and

To also advance needed capital so that the company can start operating and for the purpose of this exercise we’ll say it is $50,000. This is commonly referred to as Working Capital.

Let’s look at how this is recorded in the company accounting system. It is essential that the $50,120 be deposited into the company’s bank account. The $120 is coded to the Paid up Share Capital Account and the $50,000 is coded to the Shareholder Current Account, which essentially records any loans either to or from the company. Read More »

Ever been here I have. There was a time when I was in debt where I owed quite a bit of money to people and the bank. It was so bad that even my Credit Cards were maxed out. There were times when I would see someone I owed money to and I would cross to the other side of the street just so I would not have to stop and talk to them. I was financially, physically, emotionally and spiritually not in a good place.

I am going to share with you, what I believe is, valuable knowledge regarding the “Debt Cycle”. It was given to me during my darkest hour and was to be a major turning point in the way I looked at debt. Read More »

If you are in business it is important that you understand the Debt Cycle and how it relates to your customers / clients (your Debtors), you and the people you owe money to (your Creditors). I would go as far as to say that not understanding the “Debt Cycle” is the primary reason I am seeing an increase in the length of time it is taking for businesses to pay their creditors.

Business Debt

As a business we extend debt to our customers and our terms are that “Payment is due in 7 days of receipt of the invoice”. As the business owner, unless the client has a query regarding the invoice, I expect our clients to honour that and on the main this happens.

However having said that if I don’t follow up on an overdue account then the seven (7) days does not mean a thing and can actually lead to the client paying their account later and later. So on the odd occasion that this happens I need to “nip it in the bud” so to speak.

Conversely, I expect our clients, not to ignore their debt to us and to come to me if they are unable to for one reason or another to pay by due date. Believe you me there is a lot of expense involved in chasing bad debts. Read More »

Self-employed and KiwiSaver

You don’t have to be an employee to be part of KiwiSaver, but the rules are a bit different.

If you will not receive PAYE income as a contractor – for example, if you are going to invoice for your contract work – your employment status will change to self-employed and you will notbe required to make any contributions to your KiwiSaver account.

KiwiSaver is very flexible if you’re self-employed. You’re not required to contribute a set percentage of your pay. Instead you can agree your contribution level with your KiwiSaver provider. Some providers may have minimum contribution requirements. You can either: Read More »

This morning I received an email from a person who has known me more than 30 years and my Christian name had been misspelled, I am sure it was a one off, however as it happens regularly, I got to thinking “what can I do about it”.

Going from a person employed on salary and wages to going into business or becoming a self-employed contractor there are certain aspects of this transition that you need to understand and consider very carefully: –

Finally, thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

As a Profit First Professional helping our clients to increase profitability, I educate the business owner / self-employed contractor that like all other business expenses, taxes must be saved for. In Profit First methodology, regarding saving for taxes, we encourage clients to have a minimum of three bank accounts: –

Their current operating account which is normally a cheque account which we ask them to rename as the Income Received Account,

A savings account named Operating Expenses Account, and

A savings account named Tax Account.

For the purpose of this discussion I will keep the explanation simple as to what I require you to do:-

As with anything in life you have the freedom of choice however also be aware that with every choice you make there is a consequence. In this instance you have the choice to either take care of your business compliance responsibilities yourself or to engage the services of a professional such as ourselves.

In general, compliance means conforming to a rule, such as a specification, policy, standard or law. Regulatory compliance describes the goal that organisations aspire to achieve in their efforts to ensure that they are aware of and take steps to comply with relevant laws and regulations.

Thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

The GAAP (Generally Accepted Accounting Principles) formula for determining a business’s profit is Sales – Expenses = Profit. It is simple, logical and clear. In the GAAP formula profit is a left over, a final consideration, something that is hopefully a nice surprise at the end of the year. Alas, the profit is rarely there and the business continues on its cheque to cheque survival.

Sales – Expenses = PROFIT

With Profit First you to flip the formula to: –

Sales – PROFIT = Expenses

Logically the math is the same, but from the stand point of the entrepreneur’s behaviour it is radically different. With Profit First, you take a predetermined percentage of profit from every sale first, and only the remainder is available for expenses.

If you want help or have any questions in regards to the above then please contact us or find out more about Profit First

Most entrepreneurs do not have the time or gumption to read the different accounting statements necessary to manage the financial aspect of their business.Theoretically you should review and correlate your Income Statement, Balance Sheet and Cash Flow Statement monthly (or more frequently), but few entrepreneurs do. Most resort to “bank balance accounting,” where we check our bank balance every day and make financial decisions based upon what we see. Per Parkinson’s Law, we consume what we see in our bank account.

Profit First encourages the entrepreneur to continue “bank balance accounting” by first allocating money to profit (and other accounts) so that the entrepreneur sees the actual portion of deposits that are available for expenses and they automatically adjust their spending accordingly. About Profit First

“If you always do what you’ve always done, you’ll always get what you have always got.”

Thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

Author and British naval historian Cyril Northcote Parkinson theorized that our demand for a resource increases to meet the supply of it. That is why when we are given two weeks to do a project it takes two weeks, and when we are given eight weeks to do the same project it takes eight weeks. That is why when given $1,000 to complete our work we get it done with $1,000 and when given $10,000 to complete the same work, it takes $10,000. Profit Firstmakes Parkinson’s Law an asset. By taking profit first the money available for expenses lessens, and we are forced to find ways to get the same things done for less money.

Thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer:This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

As a new start-up or new part time business owner do not fall into the bad habit of co-mingling your finances with your personal money. While it may be the easiest, most convenient and cheapest way of operating, it can have its drawbacks – especially further down the line. As a new business owner you need treat your business as a business, regardless of whether it’s a part-time venture or not; while setting up a separate bank account could mean additional bank fees and expenses, if you don’t you could be storing up a lot of hassle for yourself in the future.

All our clients will vouch that keeping their business spending completely separate from their personal account ensures manageability.

An audit trailis a paper or ‘electronic’ trail that gives a step by step documented history of a transaction. It enables an examiner to trace the financial data from general ledger to the source document (invoice, receipt, voucher, etc.). The presence of a reliable and easy to follow audit trail is an indicator of good internal controls instituted by a firm, and greatly assists in the case of an IR audit.

Thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.